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_2016/2017 Supply Chain Management Lecturer. Zied BABAL Case #1: Distribution Management for the Company Produlact The company Produlact is born, from the merger of two companies having complementary activities: production and trading of cheese for the first and of milk and yoghurt for the second. The commercial consolidation has been easily performed since they have about 1500 common customers all over France. The logistics manager would like to evaluate three scenarios: ~ Direct delivery from the factories to the customers, — Delivery via regional plate-forms, ~ Delivery via a central warehouse. The structure of the distribution network is the following : Factories" production aud location: ~For the cheese, .. ast 8°00 tons ~ For the milk and y Plaie-form location: Rungis, Nancy, Bordeaux, Lyon, Renn ee bet quadit Lille, Béziers The distances are as follows (in km): [Bordeaux] Lille | Lyon | Béziers ney | Rennes Cherbourg | o | 470 | 790 | 980 | 640 230 Auxerre 0 | 380 300 |e 0 | 280 430 ‘The produced and distributed volumes (in tons) are as follows: [Borcieaux] Lile | Lyon | Béziers | Nancy | Rennes | Rungis [Bordeaux] | i | 1800] 2000] 2400] 4000 soo} 900) 1300 jauxerre | 2000 800 | 1400 500 800} 1100] 1400 | [Total 3600 | 2800] 3800/1600] 1700] 2000| 2700 ENS! A Bor Cedrie agement Nord 2800 ae cal 10000 rene ‘The transport costs are as follows: Direct delivery from the factories to the customers: It has been estimated that the required average distance to deliver a customer, is about 350 km, the resulting average cost is 0.35 €/ton-kilometer. Delivery via regional plate-forms: = Average approach cost (factories to plate-fortis):.....se:neen 0.045 Ekg, ~ Passage from docks to plate-form: 0.015 E/kg, — Average delivery (plate-form to customer): 0.045 kg, NB. In this scenario, the prices are independent of the number of kilometers and depend only on the weight ENSTA Borj Cedria 2016/2017 ‘ia central warehouse: Approach: For the interval 0-200 km, 0.037 Gikg, For the interval 200-400 km.. vase: 0,052 €/kg, For the interval more than 400 km... 0.060 €/ke, ~ Stocking and material handling: global cost of 0.0075 €/kg, ~ Delivery: The company has done a study in order to locate the central warehouse and has found a best location for which the average distance to deliver a customer was about 580 km and the cost of 0.09 €/ton-kilometer, NB. By approach cost, we mean the cost of the delivery of big volumes from the factories to the central warehouse, The products are tansported usually by using full vehicles: the cost depends only on the weight per km interval, Questions 1. What would be the idea behind the study that the company has performed in order to determine the location of the central warehouse, 2. Evaluate quantitatively each scenario, Identify and explain the cost differences. 3. Ifyou have to comment qualitatively the three scenarios, what would you say? Case #2: Planning with Subcontracting and Overtime for C&C Company The objective is to propose a production plan to the company C&C for the next six moat Since the production cycle is short, the sales for each month are totally produced during the same month, You should evaluate in a first step, three possible plans: Plan #1: The plan consists of producing exactly the monthly sales by varying the number of workers Plan #2: The plan consists of producing at each month the average sales for six months by n be keeping @ constant number of workers. The unsatisfied demand at any period ca backordered. Plan #3: The plan consists of producing at each month the minimum sales (April) by keeping a constant mumber of workers and by sub-contracting the requirements that can not be satistied by the internal production ENSTA Bor Cedria Supply Chain Manag 2016/2017 In order ta simplify the problem, we assume that the company C&C can recruit or dismiss workers each month as much as it is necessary. Obviously, recruitment costs are incurred if additional workers are recruited, The costs are due to their taining. Dismissal costs are incurred if workers are dismissed, i.e. lower number of workers is needed for the following month, This latter assumption is unrealistic, but it simplifies the problem, ‘The forecasts of the sales from January to June are given in the following table, Month | January | February | March [April [May | Jum les (units) | 1800 | 1500 {| 1100 | 900 | too | 1700_| We assume that sales that can not be satisfied in a particular month ean be antici using anticipating stocks. We also assume that there is no initial stock evailable at the beginning of January. he company starts at the beginning of January with 42 workers. In the first part of this problem we assume that the policy of the company C&C is to not use any overtime working. Hence, the computations should he done by considering only one shift of 8 hours per day and 20 working days per moath, The following costs are considered by the company when it evaluates the different plans: - Material 100 €hunit 10 €/unit- month = Stock-out C08t ws sonnennnrnnennnnnndO Cunit-monih — Sub-contraciing cost. 100 €/unit (excluding materia!) ~ Recruitment COSt....sseecseeseeeeeeeeeel 000 C/recruitment = Dismissal cost sonnets 000 Ee time per unit... hoves/unit <= SA 1s@/hour AV missal = Working hour c0st,.. Questions 1, Evaluate the total cost for each produetion plan. Present the result graphically in tables by detailing the computations. 2. What is the best plan for the company’? “The human resoutces director proposes another plan (Pian #4) which consists to use overtime: jon or disinissi aking instead of subcontracting the produe 2 workers. That means that CAC should Keep coastant the number of workers (i.e. 42 workers) during she six months ancl ENSTA Dorj Coda 4 Supply Chain Management _ 2016/2017 sales al each month, the number of production hours needed is ensured by in order to meet t the permanent workers of the company. Anticipating stocks can be used if they are produced in advance by some the 42 workers who are not fully utilised in previous months. No backorders are assumed in this plan, Questions 3. Evaluate the total cost for Plan # 4. Is it interesting for C&C to choose this plan? Case #3: Stock Evolution and Costs A distribution company would like to launch a promotion on a television brand with large screen. TVs are imported from Taiwan, They are transported in containers by ship to Anvers and they are sent to the central European warehouse that is located in Strasbourg. The frequency of ship trips from Taiwan is 2 per week, the warehouse receptions can be done only on Monday morning and Thursday morning. The repienishments should be done by means of full containers, one container contains 300 televisions. The promotion will teke place during weeks 19, 20 and 21. The company should establish a replenishment plan for its central warehouse, and thus set the dates of receptions and the number of coniainers received. In the stecring committee consisting of the Marketing (M) manoger, the financial (F) manager, and logistics (L) manager, three opinions are proposed, The demand for televisions to the warehouse (made by the company’s stores) is given in Appendix 1 M, F and L agree to avoid any inventory shortage and unnecessary stocks, «1. In order to satisfy a high service quality, M would like to receive the whole ordered quantity on Monday of week 19. In order to reduce the inventory holding costs. F would like to receive the products every Monday and Thursday. The annual inventory holdi of the product cast), +3. L has the objective of reducing the inventory but also would Tike to limit the replenishment cost (custom, transport, delivery controls, etc.). The replenishment cost is estimated to ¢=1000 € per replenishment, plus the cost per container, es, for which the value is not known. L would like to have 3 receptions, one every Monday, Questions = 1, Knowing the demand and the constraint of the containers’ capacity, how many containers and televisions should be received during the three weeks of the promotion? 2. Report, on the table of Appendix 2, the replenishment plan of each maneger. In ofd to facilitate the answer, please don't report the daily stock evolution but just report the stock evolution (linear assumption for the inventory consumption) between the initial and final stock for each policy TA Borj Ceciria Supply Chain Mane: 2016/2017 3, We would like to compare the management costs (inventory holding + replenishment) ‘of each policy. a. Explain why the cost ce can be ignored in order to do this comparison. b. Calculate the inventory holding cost of a television if its value is equal to 700 €. c. Calculate, for each policy: i) The total replenishment cost over the 3 weeks. ji) The total inventory holding cost over the 3 weeks. d. Which policy induces the lowest cost? APPENDIX 1 EEE Eee Hee eee eee ee eee eee eee eer eeeeee eee eee [ Week 1 Day [ Demand | / 397 | | | Tuesday 602 | 19 | > Wednesday | 693 | | | Tmt | oe | Friday | 397 | | It Saturday | 1004 | | Monday | HO | Tuesday 591 } \ 20 | Wednesday | 698 | 1 Thursday | 494 | | Friday 350 | Saturday | 1020 | Pte | Monday | 402 | i | Tuesday 592 | i 2 | Wednesday 696. | | Thursday 502 | Friday 904 rj Cedria 6